July 11, 2012

AP Coverage of ‘Lie-bor’ Scandal Fails to Note That Geithner Ran the New York Fed When It Learned of Problems

Not only is the Associated Press aptly currently described as the Administration’s Press — as least as long as the White House’s current occupant remains there — it also seems to be serving as the Administration’s Protection.

In a story about the “Lie-bor” scandal, wherein British banks have admitted to colluding to set the London Interbank Offered Rate (LIBOR) — arguably the world’s most important benchmark for interest rates — artificially low, AP reporter Martin Crutsinger “somehow” forgot that current Treasury Secretary Tim Geithner was President of the New York Branch of the Federal Reserve Bank during much of the time period in which Congressional investigators are interested. Clearly, they want to know what Geithner knew, and when he knew it. The first three paragraphs of Crutsinger’s writeup, followed by his sole context-free mention of Geithner, follow the jump (bolds are mine throughout this post):

Two congressional committees are raising questions about what U.S. regulators knew concerning allegations that a key global interest rate was being manipulated.

The chairman of a House Financial Services oversight subcommittee has asked the Federal Reserve Bank of New York to provide transcripts of discussions between Fed officials and the British bank Barclays regarding the setting of interest rates from September 2007 to November 2009. The New York Fed said it would comply with the request.

(Paragraph 6)

He (Democratic U.S. Senator Tim Johnson) said he was asking Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner to be prepared to answer questions about LIBOR when they appear before his committee at hearings later this month.

Over two hours before the 1:57 PM, July 10 time stamp currently seen at Crutsinger’s report, Reuters broke the news that the New York Fed was tipped off to the existence of LIBOR problems in late 2007 (8:03 p.m. in the India Standard time zone converts to 11:03 a.m. in the U.S. EDT):

Insight: Fed knew of Libor issue in 2007-08, proposed reforms

The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed. Following an inquiry with British banking group Barclays Plc in the spring of 2008, it shared proposals for reform of the system with British authorities.

The role of the Fed is likely to raise questions about whether it and other authorities took enough action to address concerns they had about the way Libor rates were set, or whether their struggle to keep the banking system afloat through the financial crisis meant the issue took a backseat.

A New York Fed spokesperson said in a statement that “in the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and emails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with Libor.

… On July 9, Rep. Randy Neugebauer, chairman of a subcommittee of the House Financial Services Committee, sent a letter to the New York Fed asking for transcripts of any “communications with Barclays regarding the setting of interbank offered rates from August 2007 to November 2008.”

Johnson also said the committee planned to ask Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke about the allegations at hearings later this month…. According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a “Fixing LIBOR” meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

It is unclear precisely what was discussed at this meeting or who attended. Among those invited, along with Geithner, was William Dudley, who was then head of the Markets Group at the New York Fed and who succeeded Geithner as its president in January 2009. Also invited was James McAndrews, a Fed economist who published a report three months later that questioned whether Libor was manipulated.

There’s really no argument over whether Crutsinger should have noted that Geithner was head of the New York Fed in 2007 even before the Reuters story broke. Now that it has, the AP owes its readers and subscribers an update noting Geithner’s prior role. As of 12:25 p.m. EDT, it hasn’t done one. There is virtually no chance that the AP would allow such an omission to occur if a Republican or conservative were in similar circumstances.

Well of course it hasn’t — the Administration’s Press is also the Administration’s Protection.

Cross-posted at NewsBusters.org.


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